Scandinavian Working Papers in Business Administration
Finance Research Group Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No F-2009-02: The Forecast Performance of Competing Implied Volatility Measures: The Case of Individual Stocks
Leonidas Tsiaras ()
Additional contact information
Leonidas Tsiaras: Department of Business Studies, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: This study examines the information content of alternative implied volatility measures for the 30 components of the Dow Jones Industrial Average Index from 1996 until 2007. Along with the popular Black-Scholes and "model-free" implied volatility expectations, the recently proposed corridor implied volatility (CIV) measures are explored. For all pair-wise comparisons, it is found that a CIV measure that is closely related to the model-free implied volatility, nearly always delivers the most accurate forecasts for the majority of the firms. This finding remains consistent for different forecast horizons, volatility definitions, loss functions and forecast evaluation settings.
Keywords: No keywords
37 pages, March 19, 2009
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F-2009-02
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